The Herald Credit Score Q & A

Burying Your Head In The Sand Won't Improve Your Score

By Jeff Meek

Question

Much as I am irritated by television adverts which urge you to check your credit score I am intrigued but too anxious to do so since I fear the facts may ruin my week-end. More practically, are there steps which can be taken to improve the situation before I take a look? I know I have been a little cavalier with credit cards over the last few years.

Answer

It’s clearly much better to take a look at your credit report, even if it is only to provide you with a base line for improvement.

On the other hand, searches on your credit report can affect your credit score as they are recorded and can count against you in a lender’s credit scoring, so it’s best to leave at least three months between each application.

Basic steps will help your score: for example, if you have credit cards make sure you arrange to pay the minimum balance by direct debit so you never miss a payment which will lose you points.

Reports now show outstanding balances of credit cards and overdrafts so it is preferable to be seen to owe no more than 30 per cent of the credit card’s limit. To achieve this it may be worth balancing cards out to ensure none of them have permanent large balances.

If you have an unattractive credit scoring consider embarking on a six to nine month programme of making every credit card and other loan payment on time. This will go a long way to persuading new prospective lenders that you are a worthwhile customer.

There are also a number of steps you can take to speed your return to credit worthiness.
Identity theft is an increasingly common problem so make sure that you have a full understanding of all the credit agreements recorded in your credit report. If you do spot what you believe to be an error, contact the lender concerned and ask them for further information.

Similarly, if you have had any court judgements against you for unpaid debts in the past, see if you can get these dealt with by paying them and applying to the court to remove the court reference.

Keep accounts separate since although being married does not lead to bad credit, joint bank accounts can. If your spouse has a bad credit history then a joint account will mean that you do too.

In the unhappy event that you separate, even if you were not married but had joint finances, consider contacting all the credit agencies to ask for notice of dissociation to prevent any credit problems your ex-partner may have faced from affecting your credit score. This is clearly important if your ex was an even poorer manager of money than you.

Finally, if you have moved house recently make sure that you have updated your record on the voters’ roll. Consider making any applications for credit before you move as it will take time for your credit report to settle down.

The good news is that a tarnished reputation can be restored over time but you need a starting point to measure how your credit score has improved so steel yourself to requesting your credit report and setting about improving it.

Jeff Meek is Edinburgh Managing Partner of French Duncan LLP, Chartered Accountants

This article appeared in The Herald, 8 May 2010.